Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 28, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Capital receipt or revenue receipt - receipt of compensation under JV agreement - surrender of certain rights - there as no impairment of source of income - taxable as revenue income - AT
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India-UK DTAA - income on account of slot chartering - taxable u/s 44 B OR 28 to 43 - Article 9 of the Indo-U.K. DTAA includes slot charters/slot hire agreements as availed of and utilized in these cases - HC
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It is well settled legal proposition that the registration proceedings u/s 12A r.w.s. 12AA are not to be confused with the assessment proceedings wherein the provisions of section 11, 12 and 13 are applicable - AT
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Operational income received from lessee - business income OR house property? - There is nothing on record to suggest that the assessee has exploited the IT Complex as a business venture. - AT
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Addition u/s 68 - It would not generally be possible to obtain bills from agriculturists and therefore, the best that could be done in such circumstances was to have self-made vouchers. - AT
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Deduction u/s 80IB – embroidery work on cloth. - held as manufacturing activity eligible for deduction - AT
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Indo UAE DTAA - Fee paid to Emirates Advocates - merely stating that this was for the purpose of registration of trade-mark application and, therefore, it is in the nature of professional services, cannot be upheld. - AT
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Perquisite value of rent free accommodation - reference to Section 17(2)(i) was unwarranted because the assessee was under no obligation to incur the expenses on repairs and renovation or modification of rent free accommodation - HC
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Educational exemption - income from in non-educational activities like horticulture - utilized in the educational activities of the institutions - exemption allowed - HC
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Exemption u/s 10(23C)(vi) - collection of fees for placement and training - whether constitute an educational activity - if in accordance with Act of 2007, exemption to be allowed - HC
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Perquisite - rent free accommodation - in spite of the legal position that Rule 3 is intra vires, valid and is not inconsistent with the provisions of the parent Act under section 17(2)(ii), it is still open to the assessee to contend that there is no 'concession' in the matter of accommodation provided by the employer to the employee and hence the case did not fall within the mischief of section 17(2)(ii) of the Act - AT
Customs
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Export of wooden furniture components - sawn timber - prohibited for export under the Foreign Trade Policy - respondents had a bona fide belief that the subject goods can be legally exported as furniture parts - AT
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Amends Notification No. 40/2012-Customs (N.T.) - Regarding Issue of ‘proper officer’ under the Customs Act, 1962. - Notification
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Joint Commissioner or Additional Commissioner of Customs (Import), Jawaharlal Nehru Custom House, Nhava Sheva, to exercise the powers and discharge the duties as adjudicating authority over the powers and duties. - Notification
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Joint Commissioner or Additional Commissioner of Customs, Custom House, Cochin, to exercise the powers and discharge the duties as adjudicating authority over the powers and duties. - Notification
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Confiscation of vessel and penalty imposed - it is settled law for movements/voyages in or out of the country the Barge, in any event, becomes a foreign going vessel and cannot be said to be imported goods. - AT
Corporate Law
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Winding up proceedings - charge against the property was created but registered - held that charge is void and would be governed by section 125 - HC
Service Tax
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Services provided in respect installation of meters at the premises of electricity consumers - claim of benefit of Notification No. 45/2010-ST allowed - AT
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Cenvat credit of ST paid under reverse charge - claim for Cenvat credit being a substantial right it cannot be denied on the basis of procedures which cannot be implemented in the facts of the case - AT
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Cenvat Credit of service tax paid on Transit Insurance and Group Health Insurance Policy services - input service - AT
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Commercial or industrial construction service - organisation working on no-profit no-loss basis, engaged in imparting knowledge to poor students - construction activity would not be covered by the definition of commercial and industrial construction services - AT
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Demand of service tax – return was filed but tax paid challan was lost - It is possible to verify the details are available with the PAO. - predeposit stayed - AT
Central Excise
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Demand – personal penalty – penalty is sought to be imposed not only on the firm but also on the partners which is clearly not permissible- AT
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SSI Exemption - Whether indicating the name of the manufacturer on the packaging of the product would amount to affixing a brand name or not - held no - AT
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Brand name – SSI exemption – contention of the assessees that ‘Micro’ is not a brand name belonging to MPPL but stands for the first name of MCPPL, cannot be accepted- AT
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Activity of cutting and polishing of granites amount to manufacture only from 1-3-2006 - HC
Case Laws:
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Income Tax
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2012 (8) TMI 682
Reopening of assessment u/s 147 - return of income was processed u/s 143(1) - receipt under multi-party settlement agreement signed including Schneider Electric S.A. (SE) has been claimed to be capital in nature - Held that:- As decided in Rajesh Jhaveri Stock Brokers P. Ltd. (2007 (5) TMI 197 - SUPREME COURT ) that income escaping assessment in the case of an intimation under sec. 143(1)(a) is covered by the main provision of sec. 147 as substituted with effect from 1-04-1989 and failure to take steps under sec. 143(3) will not render the AO powerless to initiate re-assessment proceedings when intimation under sec. 143(1) has been issued - If the AO has cause or justification that income had escaped assessment, he can be said to have reason to believe that income had escaped assessment and the expression "reason to believe" cannot be read to mean that the AO should have finally ascertained the fact by legal evidence or conclusion - the assessee vide letter dated 27.11.2007 had submitted details of agreement between the assessee and TE on the basis of which AO came to the prima facie belief that the amount received by the assessee of Rs. 12,12,18,990/- was taxable as revenue receipt and not as capital gains , thus it is neither the case of change of opinion nor there is re-appraisal of the material available on record - no infirmity in the order of the CIT(A) confirming the reopening of assessment - against assessee. Assessing the receipts from a joint venture agreement with a French company - "Profits and gains of business or profession" OR "Capital gain" - the assessee contested that Schneider had incorporated a wholly owned subsidiary company in India in contravention of Press Note No.18 of 1998 - Held that:- The serious disputes arose between TE/Schneider on one hand and the assessee and CS on the other hand, which were subject matter of legal proceedings initiated by the parties against each other in various Courts. The Joint Venture Agreement intended to put an end to disputes and legal proceedings by amicable global settlement on the terms and conditions set out in the agreement. By virtue of Joint Venture Settlement Agreement the assessee recognized and acknowledged SE/SEI as owner of patents, designs and trade marks. SE/SEI agreed to exit from joint venture and were accepted as legal successor of TE/TC. It was jointly agreed to put an end to legal proceedings as well as their outstanding commission, if any agreed and to any claim/s or potential claim/s in relation thereto. The assessee company agreed not to use the name "Telemecanique" or "TE" or similar words, its logo, trade mark, copy right and design relating to artistic work - The entire joint venture agreement is in respect of legal disputes between the assessee and joint venture partner. Therefore, it is incorrect on the part of the assessee to say that the payment has been received by the assessee for giving no objection under Press Note No.18 of 1998 - Such disputes arose in 1989 whereas the Press Note No. 18 was issued on 14th December, 1998 - Joint venture settlement agreement was entered mainly to put end to all litigations between the parties. Press Note 18 played only a role of a catalyst to expedite the settlement. The clause of the letter dated 24th April, 2003 clearly indicates that there as no impairment of source of income. The assessee's engineers and work force was competent enough to produce Indianized product competing with that of the wholly owned subsidiary company set up by the collaborator. Moreover, the assessee had acquired high level of technical know-how in the manufacture of the products. If the assessee was deprived of the technology, the business would have collapse. Therefore, it cannot be said that profit earning apparatus was affected in any way. Therefore, the compensation received cannot be treated to have been received for impairment of source of income. The Tribunal has power to assess the income correctly. If income is assessable as business income, the compensation should be assessed as revenue receipt liable to be assessed as business income. Therefore the Revenue could have taken the additional legal plea at any time for assessing the compensation received by the assessee - against assessee.
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2012 (8) TMI 681
India-UK DTAA - income on account of slot chartering - taxable u/s 44 B OR 28 to 43 - Held that:- Section 115VB includes slot charter agreements in the phrase "operating a ship", section 115-VI draws a distinction between "operating ….... ships" on the one hand and "other ship related activities" such as slot charters on the other. Therefore "slot charters" are not considered as "operating ….... ships". In other words, a slot charter is considered to be a ship related activity but not the activity of "operating ….... ships" - On clarifying that section 115VI does not lead to the exclusion of slot charters from the ambit of the phrase "operation of ships" in Article 9 of the DTAA. Nor does section 115VB include them within the phrase in the DTAA. Chapter XII-G is of no assistance in this regard as the definitions therein appear to be for the purpose of the Chapter alone unless otherwise required. Article 9 (1) refers to "Income ... from the operation of ships ... ". Section 44B refers to profits and gains of "the business of operation of ships". The ambit of the identical phrases "operation of ships" in section 44B and Article 9(1) is the same. This conclusion is not arrived at by plucking out the three words from both the provisions and comparing them de hors the context in which they are used in the respective provisions. They are used in a similar context namely in the context of "income" [(as used in article 9(1)] or "profits and gains" (as used in section 44B) from the operation of ships. Both the provisions relate to the same subject namely taxation. The comparison between Article 9(1) and section 44B is, therefore, apposite and in accordance with the mandate of Article 3(3) of the DTAA. The words not having been defined in the DTAA must be given the meaning which they have under the laws of India relating to taxes which are the subject of the Convention. Thus as income from slot hire agreements fall within section 44B they must be held to be within the ambit of Article 9(1)- As a result of the view it is not necessary to consider the submissions as to the manner in which an international treaty must be interpreted. We are of the opinion that Article 9 of the Indo-U.K. DTAA includes slot charters/slot hire agreements as availed of and utilized in these cases - in favour of the assessee
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2012 (8) TMI 680
Denial of registration u/s 12AA - Held that:- It is well settled legal proposition that the registration proceedings u/s 12A r.w.s. 12AA are not to be confused with the assessment proceedings wherein the provisions of section 11, 12 and 13 are applicable - In the present case CIT invoked only the provisions of section 11, 12 and 13 for the purpose of denial of grant of registration u/s 12AA , thus, it is clear that the impugned order is founded to be on irrelevant provisions of section 11, 12 and 13 , which are operative and relevant in the course of assessment proceedings as provisions of section 12A and 12AA are material and relevant, for the purpose of granting registration u/s 12AA - order of CIT is set aside and he is directed to grant registration to the assessee society - in favour of assessee.
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2012 (8) TMI 679
Disallowance of commission expenses - Held that:- It is settled law that if the assessee claimed deduction of any expenditure the burden of proof is on the assessee to establish that such expenditure was incurred wholly and exclusively for the purpose of assessee's business. In the present case it is an admitted fact that there is no written agreement between the assessee and the recipients of the commission agents. Even if there is no written agreement, the assessee could claim deduction for the expenses provided if it is established with documentary and cogent evidence that such expenditure was incurred for the purpose of its business. The assessee could not even produce any correspondence between the parties which could have served as a contemporaneous circumstantial evidence. The assessee is not able to correlate the commission payments with reference to the nature of service rendered by the recipient of the commission - the person/party to whom the payment by cheque is alleged to have been made has his own story to tell and which story is believed - against assessee.
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2012 (8) TMI 678
Addition on disbelieving the income from agriculture - Held that:- There is no dispute with regard to the factum of agricultural activities carried out by the assessee, though there is minor difference with regard to the land holding of the assessee and CIT(A) was not justified in not admitting the additional evidence sought to be filed by the assessee for the first time before him, notwithstanding the objections of the AO in the remand report, which are too technical to brush aside the very validity of the certificates filed - If there is any doubt about the competency or the technical knowledge of the persons who issued the certificates in question, the same could have been got verified or the assessee could have been asked to produce similar certificates from the competent Revenue authorities - set aside the impugned order of the CIT(A) and restore the matter to file of the AO for fresh consideration duly considering the additional evidence - in favour of assessee for statistical purposes. Addition on unproved credits - Held that:- Since the address of the creditor given in the confirmation letter is that of the USA and it is beyond verification by the Indian Income tax Officers and in view of the statement of the assessee that the said creditor has returned to India, and the assessee would be in a position to establish the genuineness of the transaction, duly establishing identity of the creditor and his creditworthiness, in the interests of justice it just and proper to set aside this issue for adjudication - restore the matter to the file of AO for fresh adjudication - in favour of assessee for statistical purposes. Disallowance of expenditure on car - asset used for both personal land professional purposes - Held that:- This is a case where provisions of S.38(2)will apply where any building, machinery, plant or furniture is not exclusively used for the purposes of the business or profession, the deductions shall be restricted to a fair proportionate part thereof which the AO may determine, having regard to the user of such building, machinery, plant or furniture for the purposes of the business or profession - estore the matter to the file of the assessing officer, for re-consideration - in favour of assessee for statistical purposes.
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2012 (8) TMI 677
Operational income received from lessee - business income OR house property ? - Held that:- The prime object of the assessee under the said agreement was to let out the portion of the said property to various occupants by giving them additional right of using the furniture and fixtures and other common facilities for which rent was being paid month by month in addition to the security free advance covering the entire cost of the said immovable property, thus the income derived from the said property is an income from property and should be assessed as such - There is nothing on record to suggest that the assessee has exploited the IT Complex as a business venture. The object in the Memorandum and Articles of Association of the assessee by itself cannot be an indicated to determine the nature and character of income. there is clear intention of the assessee to lease out the property for an initial period of 9 years and to extend the lease period further after expiry of the initial lease period, it cannot be said that the assessee has exploited the commercial asset temporarily. In view of the leasing out of the property for a long period the income has to be classified as income from house property. Therefore,no infirmity in the order of the lower authority - aginst assessee.
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2012 (8) TMI 676
Disallowance of expenditure towards labour and metal charges - CIT (A) reduced disallowance from 15% to 5% - Held that:- Considering the consistent stand of the assessee that contract work executed by it for AY under dispute involved laying new roads which require more expenditure towards labour charges and metal purchases unlike he earlier assessment year where the assessee under took repairs of existing roads, thus the CIT (A) has correctly observed that it is not possible to obtain vouchers for this type of expenditure and they have to be allowed on a reasonable basis - as the assessee had declared 11.5% which appears to be reasonable considering the nature of work executed by the assessee direction of CIT (A) to restrict the disallowance at 5% on total expenditure - in favour of assessee. Disallowance of departmental recoveries - CIT (A) deleted the addition - Held that:- The recoveries were made by the government departments towards quality control charges in case of every contractor and the assessee has also produced evidence before CIT (A) relating to the recoveries made by the department on consideration of which the CIT (A) has allowed deduction claimed by the assessee - No reason to interfere with the finding of the CIT (A) on this issue - in favour of assessee. Disallowed u/s 40A(3) - Held that:- It is an accepted practice in such nature of contract works that payments are made either daily or weekly to the labourer's through team leader (mestri) and such payment is recorded in single entry in cash book as it is simply not possible to make entries for payment made to each labourer as they are large in number. However, in reality, the payment made is an aggregate payment made to each labourer, if considered individually will be much less than Rs.20,000/-. In the aforesaid view of the matter, no disallowance u/s 40A (3)is called for considering peculiar facts of the case - in favour of assessee.
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2012 (8) TMI 675
Denial of benefit of deduction u/s 80IA - assessee was operating and maintaining two industrial parks - rent received from industrial parks towards letting out a portion of the Administrative building space - Held that:- Condensing the facts clearly prove that administrative building is part of Phase I i.e., Mariner Block. In terms with the approval by the DIPP, the CBDT also issued a notification on 29/12/2005 notifying the assessee as an industrial park for the purpose of section 80IA(4)(iii) and that infrastructure development shall include common facilities for common use for industrial activity. As is clear from the letter dt. 02/08/1999 of the assessee, administrative building is part of the common facilities. For providing smooth hassle free and quality service to the tenants of industrial park, the assessee entered into an agreement with M/s Ascendas,for maintenance and management of the industrial part and they were provided space in the administrative building on charging of rent. This was done with an objective of providing world class service to the tenants of the industrial park. Thus, providing space to M/s Ascendas is part of operation and maintenance of the industrial park. The conclusion of the CIT(A) that income derived from the allocable area is only eligible for deduction u/s 80IA(4)(iii), therefore, is not acceptable - the deduction u/s 80IA(4)(iii) shall be restricted to income derived from the ‘allocable area’ only, thus the assessee is eligible to claim deduction u/s 80IA(4)(iii) on the rental income from M/s Ascendas Property Management Services (India) Ltd - in favour of assessee.
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2012 (8) TMI 674
Addition u/s 68 made for purchases disbelieved on ground of alleged inability of assessee to prove trade creditors appearing in its books - self made vouchers - assessee being a wholesale grain merchant - Held that:- Keeping in mind the nature of business, preponderance of probability is that the purchases were from agriculturists. It would not generally be possible to obtain bills from agriculturists and therefore, the best that could be done in such circumstances was to have self-made vouchers. No defect in such self-vouchers has been pointed out. Further, application of Section 68 is called for only where any credit balance stands unproved. In present case, there were no trade credit balances at all. In view of aforesaid, dis-allowance stands deleted. Addition u/s 40A(3) - Held that:- There is no finding by the A.O. that payment made to Shri Annadurai was for any purchase at all. If Section 40A(3) has to be applied, there should be a finding that the payment was in relation to an expenditure. As long as this finding is not there, application of said Section is not called for at all. Interest dis-allowance - Held that:- As long as the credits were not questioned, interest alone could not have been disallowed. Just for a reason that partners’ current account was showing a debit balance, interest expenses could not have been disallowed. Dis-allowance made out of Cooly and Delivery charges claimed - Held that:- Defects in vouchers produced by the assessee were not pointed out. Generalised reasons for disallowances cannot stand the test of reason - Decided in favor of assessee
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2012 (8) TMI 673
Validity of reopening of assessment on ground of inadmissible deduction u/s 80IB – assessee being industrial undertaking manufacturing embroidery material and doing job work of embroidery garments, claimed deduction u/s 80IB in its return, assessment of which had been completed u/s 143(3) - assessee contended change of opinion – Held that:- It is undisputed that AO had accepted the claim and the amount has been mentioned clearly in the computation form signed by the AO and appended to the original assessment order. Also, prior to the completion of original assessment on 16.5.2006, there was a proceeding initiated u/s 154 on 17.5.2006. On the face of such facts, it is difficult to believe that the AO had not formed any opinion regarding the claim of Section 80-IB deduction when he was framing the original assessment. Opinion was certainly formed though not expressed. Reopening hence not justified. On merits it is held that it is an admitted position that assessee was doing embroidery work on cloth. There is a processing which has been done on cloth when embroidery work is done. It is not a question of simple value addition. Not only has the original raw material undergone a qualitative change but in the process a number of materials have been used. The process cannot be reversed to obtain the original material back. Hence, assessee was indeed engaged in manufacturing activity and eligible for deduction u/s 80-IB – Decided against Revenue.
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2012 (8) TMI 672
Addition on unaccounted income - Held that:- Considering the agreement with Shri Puratchidasan claim of the assessee is accepted on Rs. 2,50,000/- out of Rs. 5 lakhs that was the amount returned on cancellation of the agreement & that Rs. 12,000/- was the registration expenses for the agreement returned by Shri Puratchidasan. Insofar as Rs. 3 lakhs claimed as amounts returned by Shri Puratchidasan out of cash paid in 1990, CIT(Appeals) was of the opinion that fresh evidence was produced in the form of promissory notes could not be accepted as there is nothing on record to show that these promissory notes, claimed to have been issued by Shri Puratchidasan, were part of the seized records. Assessee has shown no reason as to why such promissory notes were not produced before the A.O - the CIT(Appeals) was absolutely justified for rejecting the claim of the assessee - against assessee.
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2012 (8) TMI 671
Writ petitions - Undervaluation of property – Held that:- difference in the consideration of the comparable property and the apparent consideration of the property in question is less than 15%, the order under section 269 UD (1) of the said Act for pre-emptive purchase of the property in question could not have been passed - order is set aside - writ petitions are allowed
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2012 (8) TMI 670
Disallowance of sales promotion expenses – Held that:- Revenue has not rebutted the fact that in the earlier years the expenditure qua the sales promotion commission was allowed and assessee has placed on record a copy of each of the assessment orders for A.Ys. 1996-97 and 2002-03, it is evident there from that no disallowance has been made in respect of expenditure claimed for sale promotion commission - disallowance deleted - Revenue’s appeal is dismissed.
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2012 (8) TMI 669
Denial of benefit of deduction u/s 80HHC on the DEPB/DFRC Licenses – Held that:- While disallowing the deduction the Assessing Officer, in view of amendment to section 80HHC with retrospective effect from 1.4.1998 held that the profit on transfer of DEPB received by the assessee is covered under clause (iiid) of section 28 of Income Tax Act - As regards DEPB – CIT upheld the action of the Assessing Officer observing that the assessee had not fulfilled the relevant conditions contained in 3rd provision inserted by Taxation Laws(Amendment) Act, 2005 – matter remanded to AO - appeal is allowed for statistical purposes
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2012 (8) TMI 668
Capital gain – disallowance of proportionate IPO expenses - assessee was a director-shareholder, had gone for an Initial Public Offering (IPO) of its shares during the relevant previous year and assessee sold his shares as part of this IPO - assessee's share was transferred to assessee only net of his proportionate share of expenses – Held that:- Assessee claimed his share of IPO expense as deduction under section 48(1) as part of expenditure incurred wholly and exclusively in connection with transfer of shares - Just because the expenditure was incurred based on a legal obligation would not render such expenditure as something not incurred wholly and exclusively in connection with the sale of shares - Assessee also produced Prospectus of IPO which clearly shows that assessee was obliged to meet pro rata share of IPO expenses - disallowance is deleted and assessee's appeal allowed.
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2012 (8) TMI 667
Provisions of Section 260-A of the Act – Revenue contended that question of law framed at the time of admission of the appeal, quoted supra, does not constitute a substantial question of law and nor does it satisfy the rigour of substantial question of law within the meaning of section 260-A ibid – Held that:- Question of fact are binding on this Court unless it has any legal error which is not noticed and lastly, since no prayer is made by the appellant as provided in Section 260-A for either reframing the question already framed or for framing any additional questions which according to them are said to arise out of the case - appeal does not involve any question of law much less substantial question of law and what is framed as being substantial question of law do not satisfy the rigour of substantial question of law for the reasons mentioned - appeal dismissed
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2012 (8) TMI 666
Depreciation allowance u/s 32 of the Act - Whether cost of assets has to be reduced by the amount of loan waived off during the year under – Held that:- Government of India waived loans - it was decided by the company to revalue its fixed assets downwards - actual cost of assets and WDV of assets for the purposes of allowances of depreciation is to be taken as per section 43(1) of the Income Tax Act 1961 - reduction done by the company in the Gross block of assets is on its own decision and on assets already capitalized in the past as well as put to use in the past - depreciation is allowable on the reduced written down value of the assets – In favor of assessee Expenses incurred for mining rights - capital expenditure or revenue – Held that:- Assessee contended that the payment to Govt. for mining rights mainly on account of mining charges claimed by assessee allowed is a revenue expenditure and are allowed as depreciation u/s 32 as intangible asset/right has not been considered by the CIT(A) - issue remanded back to the file of A.O.
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2012 (8) TMI 665
Addition – profit rate - trading (gross) profit for the year at 26% as against the preceding year, where the same stood at 27.77 – Held that:- In the event of the trading results for the immediately preceding year being better than that for the current year, the assessee shall be allowed to present its case before the assessing authority by the ld. CIT(A), and adjudicate in the matter only subsequently Disallowance of the sum paid to directors of the assessee company – Held that:- where payments were made by assessee-company to its directors was supported by a Board resolution which authorised payment being in appreciation of directors' services and encouraging operational results of company, deduction should be allowed to assessee Disallowance in respect of traveling expenses - ad hoc estimates in view of the inability of the assessee to substantiate its claim in this regard in full – Held that:- In the absence of details as the reason, it stood explained by assessee before the ld. CIT(A), that the same is only by way of journal vouchers, to balance the accounts where short payments are received, so that the (personal) accounts of the business associates, being customers (oil companies) to whom cylinders are supplied, have been squared up by writing off the differences, being for minor sums – 10% of the amount is disallowd Deduction u/s. 80IA of the Act – repair or manufacture for the purpose of deduction – Held that:- Repair of cylinders - raw material and finished product is only a gas cylinder, the assessee by its processes removing the deficiency/s, as by way of welding the joints, and effecting improvements, as by way of fixing the bottom and/or the top ring - Rendering a particular thing fit for being used for which it stand already produced or manufactured, i.e., restoring it to good and workable condition, once again, is essentially a repair - assessee's activity only amounts to repair for the purpose of deduction
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2012 (8) TMI 664
Block assessment - addition on account of on-money received in sale of flats which was not reflected in books of accounts – Held that:- Assessment order that the assessee filed the return of income in response to the notice u/s.158BD on 24.07.2005 - block ending on 26.03.2003 the AO was bound to serve the notice u/s.143(2) on or before 31.07.2006. The AO issued the notice under sec. 143(2) of the Act dated 30.03.2007 which is admittedly not within the time limit fixed by the proviso to sec.143(2) of the Act - in favour of the assessee
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2012 (8) TMI 663
Royalty - nature - assessee acquired only a licence to use the brand name and trade marks of the foreign collaborator – Held that:- 25% of the lump sum royalty payment could be attributed to acquiring capital asset in the form of commercially valuable right to continuously use the Fenner brand name and trade mark and the balance 75% could be permissible as deduction as revenue expenditure for mere use of brand name and the trade mark. - following the decision in Southern Switchgear Limited [1997 (12) TMI 106 - SUPREME COURT] confirming the order of HC in [1983 (3) TMI 18 - MADRAS HIGH COURT] decided in favor of revenue. Applicability of provisions of section 32(1) – Held that:- Assessee has not either owned wholly or partly any know-how, patents, copy rights, trade mark, etc. so as to apply the provisions of section 32(1) - assessee is only permitted to use trade mark and brand name of the foreign collaborator with certain conditions - provisions of section 32(1) are not applicable to the facts of the assessee’s case.
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2012 (8) TMI 662
Disallowance of depreciation while computing the income in accordance with the Sections 11 to 13 of the Income Tax Act, 1961 – Held that:- Similar issues were considered by Tribunal in assessee's own case wherein the Tribunal decided the issue of allowability of depreciation on the capital asset in favour – depreciation allowed
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Customs
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2012 (8) TMI 661
Confiscation of vessel and penalty imposed - alleged violation of Section 111 of Customs Act - Revenue alleged non- fulfilling of Customs formalities with regard to vessel viz no Customs permission, no immigration permission, non fulfilling of visas formalities - appellant requested to take up the matter for adjudication without issuance of SCN and also personal hearing - Held that:- Commissioner could not consider the submissions made now by the Appellants at the time of adjudication, since the Appellants had waived the show cause notice and personal hearing. The submissions made now by the Appellants are required to be considered. In these circumstances, the case is remanded to the Commissioner to consider the submissions made by the Appellants and decide the issue afresh.
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2012 (8) TMI 660
Export of wooden furniture components - goods were nothing but sawn timber which is prohibited for export under the Foreign Trade Policy - appellant stated that the respondents had no mala fide intention to export the goods in violation of the export policy – Held that:- On an earlier occasion, the SIIB, had allowed a similar cargo for export and therefore, when the present consignment was entered for export, the respondents had a bona fide belief that the subject goods can be legally exported as furniture parts – order of confiscation set aside and redemption of the confiscated goods for domestic use as ordered by the original authority, but allow redemption on a reduced fine while setting aside the penalty imposed by the original authority - Department’s appeal is partly allowed
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2012 (8) TMI 655
Penalty – confiscation – goods imported as unaccompanied baggage includes the fire arms viz. Air gun, pistol, cartridges etc – Held that:- Goods i.e. firearm & cartridges are restricted for import under the Baggage Rules. Thus the impugned goods being liable for confiscation have been rightly confiscated under Section 111(d) of Customs Act, 1962 and imposed penalty under Section 112 ibid - revision application is rejected
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Corporate Laws
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2012 (8) TMI 659
Winding up proceedings - final distribution between the secured creditors and the workers - Chartered Accountant's report that the creditors cannot claim status of secured creditor - the applicant and other creditors who allegedly hold charge against the assets of the company - particularly immovable properties - but have not got the charge registered are aggrieved by the said report of the chartered accountant. - held that:- In present case even if it is assumed that charge was created against immovable properties (as claimed by the applicant) then also mere creation of charge (assuming it was created) against immovable properties will not suffice because for present case the important requirement is the one prescribed under Section 125 viz. the charge must be registered within 30 days with the Registrar of Companies. In the cases where the company is in liquidation and payments are to be disbursed amongst secured creditors in light of the provisions contained under Section 529-A read with Section 529 of the Act, the effect of the said provision under Section 125 of the Act would be that so much of charge which is not registered in accordance with provision under Section 125 of the Act will not acquire status of, and will not be treated as, "secured charge" for the purpose of Section 529-A and Section 529 of the Act and the creditor holding such unregistered charge will not be treated and considered, to that extent, a "secured creditor" in respect of the said charge - It is also evident the Section 125 applies to every charge created by the company on or after the Ist day of April, 1914 but where the charge is by operation of law or is created by an order or decree of the court, Section 125 has no application. In present case even if it is assumed that charge was created against immovable properties (as claimed by the applicant) then also mere creation of charge (assuming it was created) against immovable properties will not suffice because for present case the important requirement is the one prescribed under Section 125 viz. the charge must be registered within 30 days with the Registrar of Companies - present application is disposed of with the clarification that OL will consider and decide the claim of the applicant and other creditors and the workers in light of the foregoing discussion and accordingly determine the disbursement ratio
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Service Tax
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2012 (8) TMI 688
Demand of service tax - services provided in respect installation of meters at the premises of electricity consumers - claim of exemption benefit provided by Notification No. 45/2010-ST dated 20.07.2010 - Held that:- As the assessee is engaged in transmission and distribution of electricity after purchasing the same from U.P. Power Corporation Limited and is selling electricity to the consumer, thus for bill the consumer for electricity consumed it is essential to install the electricity meter having capacity to withstand the load provided to the consumer. Thus, any activity or service like erection, commissioning and installation of meters as also technical testing and analysis can easily be termed as the service relating to the transmission and distribution of electricity provided by the service provider to the service receiver - claim of benefit of Notification No. 45/2010-ST allowed - in favour of assessee.
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2012 (8) TMI 687
Management consultancy services - reimbursement – Held that:- Service rendered by them was in the nature of Public Relation Service and was not classifiable under the definition for Management Consultancy Service. This being the position. The tax paid by them prior to 1.5.2006 itself was not due - demand issued invoking extended period of time for demanding tax on amount received as reimbursable expenses in connection with such service is prima facie not maintainable
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2012 (8) TMI 686
Demand of service tax - transfer of technology by a foreign company cannot be brought within the ambit of Consulting Engineer Service – Held that:- As the service provider is a foreign company, the Finance Act, 1994 is not applicable to him and he is not liable to pay service tax
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2012 (8) TMI 685
Denial of Cenvat credit – payment towards royalty – Adjudicating Authority concluded that TR-6 challan is not a valid document on which they could take credit – Held that:- Respondent is paying tax as a recipient of service - So naturally the invoice issued by the foreign collaborators would not show the service tax element - So invoice which is the normal document against which Cenvat credit is to be taken is not applicable to this situation - claim for Cenvat credit being a substantial right it cannot be denied on the basis of procedures which cannot be implemented in the facts of the case
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2012 (8) TMI 684
Cenvat Credit of service tax paid on Transit Insurance and Group Health Insurance Policy services - input service – Held that:- Even though the policy covers domestic purchase, movement of goods for job work, imports, domestic sales, exports, etc., the premium paid is linked to domestic sales and exports only - Chartered Accountant submitted that in the case of exports, there is instruction of the Board that when sales are made on FOB basis, Port is the place of removal. Therefore he submitted that in the case of exports, the appellant is eligible for the benefit of service tax credit - if all the sales are made on FOB basis, they will produce evidence to that effect and further, that will not be taken into account for calculation of eligible service tax - matter is remanded to the original authority to finalize quantum of ineligible service tax in respect of ‘transit premium
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Central Excise
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2012 (8) TMI 658
Cenvat credit on the inputs used in or in relation to the manufacture of dutiable as well as the exempted final product - non-maintenance of separate set of accounts or records - assessee contended proportionate reversed of credit and application of retrospective amendment of Cenvat Credit Rule 6(3) by Finance Act, 2010 - Held that:- We set aside the impugned order and remit back the matter to the Commissioner Adjudication for deciding the matter afresh after taking into account evidence relating to cenvat credit and also making assessment of interest payable.
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2012 (8) TMI 657
Adjournment – Held that:- Merely because the advocate is on summer vacation, it cannot be a ground for adjournment of the matter - request for adjournment is rejected Demand – personal penalty - classification - Polyurethane Moulded Foam Seat Cushion - department’s contention is that the same is classifiable under Chapter sub-heading 39263010 whereas the assessee’s contention is that the same is classifiable under Chapter 94 – Held that:- Chapter Note 1(a) of Chapter 94 which reads thus “pneumatic or water mattresses, pillows or cushions, of Chapter 39, 40 or 63.” Apparently, cushions which fall under Chapter 39 are excluded from Chapter 94 - no fault with the impugned order classifying the produce under Chapter 39 - penalty is sought to be imposed not only on the firm but also on the partners which is clearly not permissible – pre deposit waived /stayed partly.
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2012 (8) TMI 656
Whether indicating the name of the manufacturer on the packaging of the product would amount to affixing a brand name or not - SSI exemption – Held that:- In respect of the packaged goods, there are statutory requirements that the manufacturer’s or packer’s name and address should be indicated on the packages of the goods under the standards of Weights & Measures Act, 1976 and the rules made thereunder. Indicating the names and address of the manufacturer on the packages cannot be construed as affixing the brand name - appellant is entitled for the benefit of exemption
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Indian Laws
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2012 (8) TMI 683
Cheating the Government Exchequer by Non- Revision of Entry Fee - Fixing the price of the spectrum licence at 2001 level and permitting two companies ‘Swan’ and ‘Unitech’ which received the licence and to dilute their shares even before roll-out of their services - Shri P. Chidambaram, Finance minister has conspired with Shri A Raja in fixing the price of the spectrum at 2001 level thereby committed the offence of criminal misconduct - causing huge loss to the exchequer - Held that:- The Authority is guided by the need to ensure sustainable competition in the market keeping in view the fact that there are new entrants whose subscriber acquisition costs will be far higher than the incumbent wireless operators - A cost-benefit analysis of allocating additional spectrum beyond 10 MHz to existing wireless operators and and finding it to be appropriate to go in for additional acquisition fee of spectrum instead of placing a cap on the amount of spectrum that can be allocated to any wireless operator - Keeping in view the objective of growth, affordability, penetration of wireless services in semi-urban and rural areas, the Authority is not in favour of changing the spectrum fee regime for a new entrant. The Authority recommends that any licensee who seeks to get additional spectrum beyond 10 MHz in the existing 2G bands i.e. 800,900 and 1800 MHz after reaching the specified subscriber numbers shall have to pay a onetime spectrum charge at the above mentioned rate on prorata basis for allotment of each MHz or part thereof of spectrum beyond 10 MHz. The Internal Committee of DoT considered the above recommendations made by TRAI and its report was placed before the Telecom Commission, but Finance Secretary and other three non-permanent members were not informed of that meeting, but attended only by the officials of DoT and the report of the Internal Committee was approved by the Telecom Commission. Shri A. Raja accepted the recommendations of Telecom Commission, thus did not get in touch with the Ministry of Finance to discuss and finalise the spectrum pricing formula which had to include incentive for efficient use of spectrum as well as disincentive for suboptimal usage in terms of the Cabinet decision of 2003 - Above facts would indicate that neither Shri P. Chidambaram nor the officials of MoF had any role in the various decisions taken by TRAI on 28.8.2007, decision taken by the Internal Committee of DoT and the decision of the Telecom Commission. Shri P. Chidambaram and Shri A. Raja met on 29.5.2008 and 12.6.2008 but the Finance Secretary and Telecom Secretary had already met on 24.4.2008, had agreed that it might not be possible to charge operators already having allocation upto 6.2 MHz and the principle of equity and level playing field would require that the operators who get fresh allotment of Spectrum upto 6.2MHz for GSM too should not be charged for Spectrum upto 6.2 MHz for GSM. Therefore, the allegation that Shri P. Chidambaram had over-ruled his officers’ views and had conspired with Shri A. Raja is without any basis - Criminal conspiracy cannot be inferred on the mere fact that there were official discussions between the officers of the MoF and that of DoT and between two Ministers, which are all recorded - meeting between Shri P. Chidambaram and Shri A. Raja would not by itself be sufficient to infer the existence of a criminal conspiracy so as to indict Shri P. Chidambaram - No materials on record do not show that Shri P. Chidambaram had abused his position as a Minister of Finance or conspired or colluded with A. Raja so as to fix low entry fee by non-visiting spectrum charges fixed in the year 2001 or he had deliberately allowed dilution of equity of the two companies.
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